‘I’m a PC’ . . . but my notebook’s a Mac

That sales of Apple notebooks have taken off is not news. Quarter after quarter, portables have been a big part of the swelling Macintosh tide. A DisplaySearch report released earlier this month showed Apple’s notebook sales increased 60 percent year over year. It’s now No. 4 in this category, behind Dell, HP and Acer.

Windows laptops are losing luster, as Mac notebooks make surprising gains. Netbooks will help reverse the trend, but too few ultraportables run Windows Vista. For now.

Windows laptops only had about 80 percent unit share at online and brick-and-mortar retail stores in June and July, according to NPD. But measured in dollars, market share was much lower: 65 percent. The difference in both categories largely belonged to Mac laptops. Linux models, even with the increasing popularity of netbooks, are still nascent.

Microsoft and its OEM and retail partners shouldn’t ignore the dollar figure, for it is hugely significant. For every three dollars spent on notebooks at U.S. retail, one went to a Mac. Notebooks are the PC growth category, according to both Gartner and IDC. Portable shipments will reach 148.2 million units this year, according to IDC. Worldwide year-over-year growth rate is expected to be 37.2 percent and a staggering 44.7 percent outside the United States. Microsoft and its partners should dread Apple’s shocking gains in such an important computing category.

There are two underlying trends here. First, Vista’s negative buzz may be depressing sales of PC notebooks. At the moment, Windows-based notebooks are incredible bargains. For example, this week, Best Buy is selling a 15.4-inch Gateway notebook with a Core 2 Duo processor, 3 GB of memory, a 160-GB hard drive, a DVD burner, Wi-Fi, a memory-card reader and a full complement of ports for $549. By contrast, the least expansive MacBook starts at $1,099 and lacks many of the features found on the Gateway, which sells for half the price.

Still, a significant number of people are buying those Mac notebooks. The growth is such that they are not all Mac users upgrading existing gear. They are Windows users who, for a variety of reasons, are buying Macs. One of those reasons may be FoV — Fear of Vista.

In fact, most of the people who talk to me about buying a Mac are not necessarily giving up Windows. Many of them are getting a Mac notebook as their portable machine, supplementing a Windows desktop at home. They’ve heard good things about using a Mac from friends who already have one, and the fact that Macs can now run Windows provides something of a safety net.

In his piece, Wilcox thinks that Apple may have ridden this trend as far as it can based on the premium prices it gets for its hardware. Last month, I wrote about a previous Wilcox item, in which he talked about the widening gulf between Windows and Apple notebook prices. Then as now, he expects Apple to make some changes:

The question: What’s next? I predict that Apple’s grab for dollars has gone about as far as it can, without price cuts. Apple’s higher prices buck industry trends. About two weeks ago, IDC credited low-cost portables for driving worldwide PC shipments. The trend in notebook buying is lower pricing in a market where Apple sells high.

Apple is expected to announce new notebooks next month, according to the furiously churning Mac rumor mill. Expect prices to be lower, at least on the consumer-level MacBooks, though I’m not sure Apple can bring itself to do what really should be done.

Just dropping the entry-level price to under $1,000 — say, $999 — wouldn’t cut it. Apple’s new notebooks need to be closer to that $549 Gateway if it’s really interested in accelerating — and even maintaining — its market-share gains. If the company wants to put the pedal to the metal, it needs to offer a MacBook that starts in the $600-$700 range, or lower, with a feature set that matches or beats the Windows notebooks.

Can Steve Jobs bite the bullet and lower himself to play at the same level as the bargain Windows boxes? Wilcox is right in that Apple can only play the price-premium game for so long. Something’s got to give, and soon.

Another thoughtful post by Dwight that will no doubt draw flames. I agree that Apple needs to improve its price points, and last quarter’s results call suggested that they were likely to do so this quarter, although it hasn’t happened yet (maybe they’re happy with current sales?).

It’s worth keeping in mind that the hardware is only one part of the equation. While it’s now easy to compare Apples to Acers on hardware specs, it’s a little more complicated to decide how to value the software. Macs come with the highly regarded iLife suite, offering a very well integrated experience around digital media. With Windows notebooks, it’s more variable, and there are often tryout versions of software that will cost additional money to upgrade. Combine that with all the Adware that comes on most Windows computers, and it’s easy to see how the hardware manufacturer can reduce price below what would be profitable on hardware alone, through subsidies provided by the software manufacturers. Apple simply can’t chase that number, since they need to pay for their own software development, too.

Excuse me? Apple is currently increasing their market share and selling a third of the number of laptops and you’re saying they have to lower their prices? That makes no sense. They’re doing everything right.

Perhaps it’s because Macs are easy to use and have the features people want? Yes, the Gateway you described is cheaper and has more features, but it suffers with Vista and other complexities that make life for IT departments easier, but life for end users horrific.

The problem isn’t “Fear of Vista.” The problem IS Vista. The problem IS poor quality PC hardware. People are willing to pay more for products that do what they want.

Actually, Apple and other PC makers are using the same components, for the most part. Processors, drives, memory are largely comparable. One of the reasons for Apple’s shift to Intel was not just for speed/energy savings, but also for cost savings. They’re now buying components from mainstream pool in which all other PC makers swim, which makes them cost less. Apple’s charging more for a variety of reasons, not the least of which is that it can.

But Wilcox argues – and I agree with them – that this strategy will only last so long. A large segment of the mainstream buys based on price, and if Apple wants to play in the mainstream, it must adjust its pricing.

Note that Apple’s shares took a beating this morning based on analyst downgrades. They cited softening demand, and Morgan Stanley specifically mentioned buyers moving to the sub-$1,000 price point, “where Apple does not play”.

The landscape for Apple is changing, and if the company is as smart as they seem to be, they’ll adapt as necessary.

I would hope that Apple does not go after the mainstream that is purchasing purely on price. Apple should remain profitable and serving this market can only help Apple in generally bringing down the overall quality of its entire product line. Even the perception that Apple products are poorly made can hurt significantly.

If Apple can produce a good product at $599 or $549 and retain their 27% profit margin, then by all means do it. But not otherwise, its not worth simply having the revenue stream and market share and losing your profitability. Apple’s ability to innovate and be creative comes from its being profitable, although profit itself has not been one of Apple’s main goals. Good and creative products has always been its first goal and I think Apple should continue down that road and ignore the cheap end of the market, leave that to MS and Dell.

I often say you get what you pay for. Paid almost $2000 for a 160GB Macbook. I am not really in the wire on how long their hard drives last but after only 18 months, my hard drive crashed. I had (and still do) a Toshiba Satellite running XP Home before this. It’s with me for 5 years now and hard drive never died. I paid a little less with this one. I got a Mac because a friend or 2 who had them said they were the “greatest” with the matching utopian claim, “They never crash!” But I guess hard drives are hard drives.

Overall, I had a very pleasant experience with the Mac. I continued to use MS Office accompanying the switch and have no complaints. Exterior is prettier and machine is ‘fast’.

“Wilcox is right in that Apple can only play the price-premium game for so long. Something’s got to give, and soon.”

I disagree with this.

Apple has always occupied this position in every marketplace that its participated in and is unlikely to change. In the automotive space BMW doesn’t compete in every niche and has a very similar mindset. They, like Apple, offer a superior product that while more expensive represents the best engineered product you can buy in the mainstream.

If Apple decides to compete in a product area, they do so on innovation, not price. If you examine what they include in a product closely, you’ll see great value.

First, BMW does play in the lower-priced arena. Mac fans love to point to BMW, but cars and computers are very different beasts, both in terms of marketing and price.

What happens depends on what Apple wants to be in the longer term. Indications are the company is increasingly interested in a selling to mainstream buyers. Its marketing and strategy around the iPhone and, to a lesser extent, the Mac mini and Apple TV indicates that.

If Apple wants to grow, its days as going for a specific market niche are quickly coming to a close. Wall Street knows it, which is one reason its stock is down. You can bet Apple knows it, too.

Your identification of the BMW mini cooper is apt, and illustrates my point. The Mac Mini and/or macbook represents a substantial value in the price point that it occupies, just as the BMW mini cooper does in its automotive space. There are indeed much lower priced options made available by their competitors below them. and certainly each respective company could certainly cut corners and reduce the price, but they steadfastly add functionality year-over-year and maintain price. They aren’t interested in being the cheapest thing available.

This columns about notebooks. The MacBook represents a good value, but in the el cheapo mobile computing space its not a $500 notebook. I don’t think Apple wants to play there.

First, the margins on a $500 notebook aren’t practical. I highly doubt Acer/HP/etc. are breaking the bank and racking up nice profits on theirs. The companies might be doing alright, but these aren’t their profit makers.

Second, Apple doesn’t have a chopped up feature-limited version of Mac OS X Leopard ala Vista Home Basic, and don’t seem too interested in making one. Two flavors of Mac OS X… One for servers, One for everyone else.

I think Apple’s answer to the “You want a sub-five-hundred dollar portable computer from Apple” question is to buy an iPhone/iPod Touch and take a couple hundred dollars into the app store.

Apple is a small percentage of computers sold (6-8% depending on who you listen to), but once again, this columns about notebooks.

Apple is currently enjoying a marketshare sales boom in the notebook space. Something above 33% in the US if I remember correctly. And this is a recent development, just like these new netbook style mini-laptops. Say it to yourself.. 1 in 3 dollars spent in the US on a notebook computer was spent on a macbook/macbook pro/macbook air.

Who knows what Steve will do, but I’d think they will do things to keep this growth trend growing.

So your argument is that a Mini Cooper is low-end? Compared to what? A Hyundai Accent is $8000 less than the lowest priced Mini. Working that out is something like 42% less. Guess how much the low-end gateway is from the price of a MacBook? About 45% less. Funny that. It seems that “Mini Cooper is to Hyundai as MacBook is to Gateway” works out pretty well.

I know that in the PC/Win universe the idea of Apple going into the 500-700 buck laptop market is very popular and makes a lot of sense but I really doubt that, as soon as Jobs is alive, Apple will ever try to sell hardware to the Wallmart crowd. It would not make any sense and it would be a death blow to Apple’s reputation of a company that sells prime quality products.

Just imagine that the only Mac laptop available was the MacBook Pro 17″ with 250GB disk drive and a $2500 price tag.

Further imagine that the only other computer on the market was a $600 Gateway laptop all decked out in plastic.

It would take me about 5 nanoseconds to decide to buy the Mac.

It’s the same reason that I don’t own a Chevy.

I’m more interested in quality than price. Not to say that I’m a spendthrift. I look at a computer purchase on a cost per hours used basis or what’s known as life cycle cost. I’ll buy the top of the line MacBook Pro for around $2500, use it for a year, and sell it on eBay for around $1500 (Mac laptops have exceptional resale value and there is a very active resale market for them). So it’s going to cost me about $80 per month in depreciation. I’m on the computer about 12 hours a day 7 days a week. That works out to a pretty low cost per hour used.

A better question is this: “How much would you have to pay me to get me to trade my MacBook Pro for a top of the line Sony Viao?” You don’t have enough money. I don’t want to suffer Vista and I don’t want to suffer XP.

Apple can probably afford to give up some margin, and when they determine that growth is flattening, they probably will. Prices will decline a bit. But they will never play in the rock-bottom leagues of the hardware these analysts like to use for comparison, for a couple of reasons:

1) Apple has positioned themselves as a premium brand. Swinging at pitches in the dirt will incrementally devalue the brand, and they won’t do that.

2) Apple knows what these analysis never want to acknowledge: companies like Dell, Gateway, and others that relentlessly sacrificed margin for share over the past many years aren’t exactly healthy companies these days. Why would Apple want to follow that example? Apple’s balance sheet would be the envy of anyone, and the company is still growing. That’s a nice combination.

As I said before IMHO, here on this forum, when the **** hits the fan economically (and we are almost there), no one will be buying a Mac, AAPL will drop dramatically, and they will be at square one…The same goes for all the other overly priced items from Apple. Tough economic times first take out the ones who have high prices.

And, as the world economy is very reliant on a strong US economy, worldwide sales will fail even more so than here in the USA.

Macs have always been great for friends and other folks I know that have owned them.

Problem is, of all the Mac notebook users I’ve known, none of them haven’t had some sort of hardware issue on Macs purchased in the last three years. Most of the time, it’s the hard drive. All but one of the Mac owners forgave the Macs the hardware issue, had their item fixed and went on.

I guess when I wrote “No one”, I guess I did not have the diehard Mac enthusiast (who must have money to waste?) in mind. I was refering to buyers in general (no one), not the Apple Fan Crowd. I think it would actually be quite illogical to say that a small base of consumers would keep buying the same new devices or computers over and over (as they have money to waste?), so when you put all your future on new devices you best watch out. Dwight’s article is about those who use PC’s buying Mac notebooks, not Mac owners buying more Mac’s, yes?

…My logic is quite proven and has been seen many times throughout history, which is why I always buy from well established companies that do not cater only to a specific crowd – I build my own PC’s and do not use notebooks…

Also, if the best you can point to is an “Apple Insider” article (in these times) to make your point, I say you do not have one.

First of all… the BMW/Mini comment makes a great point, although not quite within its original context. A base Mini costs near as makes no difference $20,000… I don’t know about any of you, but as far as I’m concerned $20K is by no means “bargain basement” transportation and one is still paying a premium, especially when compared to the “components” that come included. The Mini makes a perfect metaphor for the MacBook… Sure, one can go purchase a $12K Hyundai or a $15K Chevy Cobalt and if all one cared about was getting from point “A” to point “B” for as little as possible, then it makes no sense at all to pay the premium for a $20K Mini. However, there are umpteen different reasons why people will pay that premium for a Mini, just as there are even more reasons why they would for a MacBook.

There are those who choose only to look at the components of the machine and pass judgement on Apple for being far too overpriced. Forgive me if I’m mistaken, but does Dell, HP, Acer, etc… spend large sums of time and money for the purpose of developing a world-class operating system for their machines to run, let alone a suite of powerful, yet easy to use applications included on each of their machines? Surely if Apple were to abandon their software and slap an OEM copy of Windows as well as a crapload of useless trial bloatware, then they could easily slash the margins on their hardware.

I’ve been using Macs for over twenty years… I’ve said it before and I’ll say it again – a Mac is not just a piece of hardware, but its the software that really makes a Mac a Mac. Does anyone honestly believe that it costs nothing to develop the Mac OS and all of its included applications? There must be, because there’s always this huge disconnect with those who balk about Macs being too overpriced.

Master Guru, yes… your logic may be proven under certain circumstances, but it applies more to you personally and hardly applies to the Mac… you even said – “I build my own PCs and do not use notebooks.” You represent a “niche” even smaller than Apple’s. Apple did not lose its market share because Macs were overpriced amidst economic downturns… they lost it due to marketing strategy, period.

Are Macs more expensive – Yes, but only in terms of upfront investment and that difference is made up through the course of ownership. That can be offset even more by purchasing refurbished… I personally only ever buy refurbished. A prime example was my PowerBook G3 “Pismo,” which I bought refurbished a year after its release for about $1800, the machine served me wonderfully for over six years as both my “frontline” and later my “field” machine. Six and a half years and nary a problem… not only that but I ended up selling it for almost $350. I could have bought a Windows laptop for probably half that amount, but it would not have lasted that long in any sort of useful capacity and I certainly wouldn’t have been able to recoup approximately 1/5th of its original value.

So even with OS upgrades and the occasional hardware upgrade, it cost me around $20 a month to run that machine… compare that to what it would have cost to run at least 2 Windows laptops with upgrades and at bare minimum a yearly anti-virus subscription and I fail to see how my Macs are so ridiculously overpriced.

The bottom line is even if economic conditions dictate that I can’t buy a new or late model Mac, I would much rather take that $500-600 and buy a 3-4 year old used Mac than some ‘Doze-box…. it would last me just as long, if not longer and still be infinitely more useful especially “out of the box.”